The Potash Production Tax Regulations

Transcription

1 1 The Potash Production Tax Regulations being Chapter M-17.1 Reg 6 (effective January 1, 1990) as amended by Errata Notices Gazetted January 5, 1990, February 16, 1990, and May 29, 1992, and by Saskatchewan Regulations 98/91, 79/96, 95/96, 21/99, 115/2003, 89/2005, 125/2010, 86/2013, 107/2013, 77/2015, 67/2017 and 121/2017. NOTE: This consolidation is not official. Amendments have been incorporated for convenience of reference and the original statutes and regulations should be consulted for all purposes of interpretation and application of the law. In order to preserve the integrity of the original statutes and regulations, errors that may have appeared are reproduced in this consolidation.

2 2 Table of Contents PART I Title and Interpretation 1 Title 2 Interpretation PART II Components of Tax Calculations 3 Annual productive capacity 4 Repealed 5 Gross revenue 6 Repealed 7 Profits 8 Depreciation allowances 8.1 Deduction of lesser amount 9 Repealed PART III Base Payment 10 Percentage of profits 10.1 Base payment holiday application and qualification 10.2 Base payment holiday calculation of amounts 11 Quantity of potash sold base payment 12 Deductions 13 Maximum rate of tax 14 Minimum rate of tax 15 Deductions for monthly instalments 16 Monthly statement 17 Annual statement 17.1 Payment of the difference base payment PART IV Profit Tax 18 Profit brackets and rates of tax 19 Deductions 20 Deductions carried forward 21 Quantity of potash sold profit tax 22 Interest rate 23 Calculation of interest 24 Quarterly statement 25 Annual statement 25.1 Payment of the difference profit tax PART V General 26 Net mine capital and accelerated capital on transfer of interest in a mine 27 New mine 27.1 New mine producers to report certain capital expenditures before beginning production 28 Insurance proceeds and other compensation 29 Reporting of certain costs 30 Interest 31 Application of payments 32 Currency 33 Arm s length 34 Monthly statement 35 Verification of statement 36 Copies of reports 37 Mine records 38 Retention of records 39 Production of records Penalty on audit assessments Interest on audit assessments Refunds 39.1 Continuance of certain capital pools Appendix

3 3 CHAPTER The Mineral Taxation Act, 1983 PART I Title and Interpretation Title 1 These regulations may be cited as The Potash Production Tax Regulations. Interpretation 2(1) In these regulations: (a) accelerated capital for a year of a producer means the amount calculated pursuant to subsections (8.3) to (8.32); (a.1) Act means The Mineral Taxation Act, 1983 ; (a.2) adjusted base tonnes means the base tonnes of the producer multiplied by the common industry adjustment factor for the year; (b) administrative and corporate expenditures means expenditures of an administrative, overhead, financial, general or management nature that are incurred by a producer or an affiliate of a producer and includes: (i) directors fees and expenses; (ii) legal and auditing fees and expenses; (iii) management fees; (iv) corporate licensing or registration fees; (v) donations, other than to religious, charitable, educational or similar non-profit organizations in Saskatchewan; (vi) research and development costs, except approved research and development costs eligible for credit and mine research and development costs; (vii) expenditures for corporate relations, including association fees and expenditures for advertising and public affairs activities and membership fees for the corporation or employees; (viii) expenditures for the functions of a corporate comptroller s department, finance department and treasury department; (ix) costs of personnel management and industrial relations;

4 4 (x) fees and expenses of consultants who perform work related to legal, audit or accounting matters, data processing or computer systems, executive pension plans, profit-sharing plans, taxes or royalties; and (xi) salaries and benefits and severance packages of corporate officers and key management personnel and their immediate staff, and any other costs associated with their offices, including transportation and relocation costs associated with their employment and severance packages; but does not include expenditures that are incurred at a place in Saskatchewan where production occurs and are solely attributable to potash produced from a mine; (c) affiliate means an affiliated body corporate within the meaning of subsection 2(2) of The Business Corporations Act, but does not include an industry sales organization that would otherwise be an affiliate within the meaning of this clause; (c.1) affiliate producer means an affiliate of the producer that is also a producer of potash in Saskatchewan as defined in clause 2(d) of the Schedule; (d) annual productive capacity means the rate, expressed in tonnes of product per year, at which a mine can reasonably be expected to produce saleable potash, determined in accordance with section 3; (e) approved market development costs for a year means, subject to subsection (3), the costs and expenses that are incurred by a producer during the year for the purpose of developing new markets for potash or expanding existing potash markets pursuant to a program that has the prior written approval of the minister; (e.1) approved remote asset means a capital asset that is: (i) located outside Saskatchewan; (ii) acquired by a producer or an affiliate of the producer; (iii) for use in the producer s Saskatchewan potash operations; and (iv) approved in writing by the minister; (e.2) approved remote capital means the difference between: (i) the total of: (A) subject to the prior written approval of the minister, the capital cost of approved remote assets; and (B) the amount calculated pursuant to subclause 7(1)(b)(iii) for all previous years; and (ii) the total of: (A) the depreciation allowance calculated by the producer pursuant to subsection 8(8) for all previous years; and (B) the proceeds of disposition of any asset described in clause (e.1);

5 5 (e.3) approved remote costs means, subject to the prior written approval of the minister, all costs, charges and expenses incurred outside Saskatchewan by a producer and its affiliates that relate to the use of approved remote assets in the producer s Saskatchewan potash operations, including: (i) operating costs of the approved remote asset; (ii) loading and unloading costs of Saskatchewan potash at an approved remote asset; (iii) real property taxes on an approved remote asset, if the asset is used to store, treat, ship or otherwise handle Saskatchewan potash; and (iv) a depreciation allowance for the approved remote asset, calculated pursuant to subsection 8(8); (f) Repealed. 17 Oct 2003 SR 115/2003 s3. (g) approved research and development costs for a year means, subject to subsection (4), the costs and expenses that are incurred by a producer, prior to January 1, 1998, in Saskatchewan during the year pursuant to a program of potash-related research and development that has the prior written approval of the minister; (h) approved research and development costs eligible for credit for a year means: less: (i) subject to subsection (5), the costs that are incurred in or outside Saskatchewan by a producer and its affiliates during the year respecting potash-related research and development and that are directly attributable to the mine, including expenditures with respect to the demonstration of new technology prior to its commercial application, for projects that: (A) are intended to improve production efficiency, mitigate environmental impacts, reduce the risk associated with mining, or develop new or improved products; (B) contain an element of technical innovation; and (C) have received the prior written approval of the minister; (ii) subject to subsections (5.1) and (5.2) any subsidy, grant or other reimbursement of these expenditures received by the producer and its affiliates; and (iii) subject to subsections (5.1) and (5.2) any amounts received by the producer and its affiliates for the sale of technology, where the costs of developing the technology were deducted in calculating profits pursuant to clause 7(2)(o) or deducted in calculating profit tax pursuant to clause 19(1) (c) in the current or any previous year, but reductions to approved research and development costs eligible for credit pursuant to this subclause for all years must not exceed the total cost of developing the technology;

6 6 (i) average quarterly price index means, subject to subsection (6), the implicit price index for the year published as GDP at market value in the table of Gross domestic product: Price indexes in the Bank of Canada Review; (j) base payment means the base payment mentioned in clause 4(a) of the Schedule; (j.1) base tonnes means, except in clause 26(1)(c): (i) in the case of a producer that had production and sales in 2001 and 2002, the average quantity of potash sold or otherwise disposed of from the mines of the producer in 2001 and 2002, expressed in K 2 O tonnes; and (ii) in the case of a producer that did not have production and sales in 2001 and 2002: (A) if the producer has not sold or disposed of 1,333,333 K 2 O tonnes of potash or more in the current year or a previous year, 75% of the quantity of potash sold or otherwise disposed of from the mines of the producer in the current year, expressed in K 2 O tonnes; or (B) if the producer has sold or disposed of 1,333,333 K 2 O tonnes of potash or more in the current year or a previous year, 1 million K 2 O tonnes; (k) beginning of commercial production of a mine means the earlier of: (i) the first day of the month that immediately follows a period of three consecutive months in which production equalled or exceeded 10% or more of its planned annual productive capacity as approved in writing by the minister; or (ii) the first day of any other month in which, in the opinion of the minister, production at a mine begins in reasonable commercial quantities; (l) beneficial interest means, with respect to a mine, a right to production from the mine or a right to proceeds from production from the mine; (m) Canadian generally accepted accounting principles means: (i) for any time prior to January 1, 1985, Canadian generally accepted accounting principles as they existed on July 1, 1979; (ii) for the period commencing on January 1, 1985 and ending on December 31, 1989, Canadian generally accepted accounting principles as they existed on January 1, 1985; and (iii) on and from January 1, 1990, Canadian generally accepted accounting principles currently in effect; (n) Repealed. 17 Oct 2003 SR 115/2003 s3.

7 7 (o) capital asset means any real or personal property, whether tangible or intangible, including any plant or equipment, that: (i) in accordance with Canadian generally accepted accounting principles, is properly treated as a capital asset; (ii) is held for use in the production or supply of goods or services; and (iii) is expected to be used during more than one year; but does not include: (iv) any interest in land or mineral rights; or (v) any property that, in the opinion of the minister, is properly referable to the production of any product other than potash; (p) capital cost means the total of the following: (i) where: (A) a capital asset is acquired from a person dealing at arm s length with the producer, the purchase price of the capital asset; (B) a capital asset is acquired from an affiliate or from a person not dealing at arm s length with the producer, the lesser of: (I) where the affiliate or person purchased the asset in an arm s-length transaction, the purchase price of the capital asset paid by the affiliate or person, or, where the affiliate or person constructed the asset, the cost of construction; and (II) the carrying value of the asset on the financial statements of the affiliate or person on the day on which the producer acquires title to the asset; (B.1) a capital asset is constructed by the producer, the cost of construction; or (C) a capital asset is approved as an approved remote asset subsequent to its acquisition, the lesser of: (I) where the capital asset was acquired from a person dealing at arm s length with the producer and its affiliates, the amount that would be determined pursuant to paragraph (A); (II) where a capital asset was acquired from an affiliate, the amount that would be determined pursuant to paragraph (B); and (III) the carrying value of the capital asset on the financial statements of the producer or its affiliates at the time of the approval; and

8 8 (ii) all freight costs, installation charges and other costs incurred by the producer and its affiliates for the purpose of putting the asset in place for the producer, including: (A) the costs of employee wages and benefits arising from the construction or acquisition of the asset; (B) the costs of site preparation; (C) initial delivery and handling costs; (D) assembly costs; (E) the net costs of testing the asset; (F) the costs of services to provide health, safety and security during installation; and but does not include: (G) the cost of contractors, subcontractors, trades and subtrades; (iii) any profit, gain, commission or overhead to an affiliate providing capital assets to a producer; (iv) the cost of any capital asset, other than approved new mines or expansions, until that asset is in use; (v) except for approved remote assets, the cost of any asset that is not located in Saskatchewan; (vi) except for approved remote assets, the cost of any asset that is not used exclusively with respect to potash produced from a mine; (vii) the cost of feasibility studies, except those related to approved new mines and expansions; (viii) interest; (ix) operating costs, operating losses or deficits; (x) administrative and corporate expenditures; (xi) fees or expenses for legal or accounting services; or (xii) the cost of directly or indirectly acquiring from a person who is not dealing with the producer at arm s length, any interest or right under or in relation to any patent, copyright, trademark, industrial design or other form of intellectual property or similar intangible;

9 9 (p.1) common industry adjustment factor means the amount obtained by applying the following formula: where: [B +(0.35 x C)] (B + C) (i) B is the sum of the base tonnes of all producers pursuant to subclause (j.1)(i) in the previous year; and (ii) C is the sum of the base tonnes of all producers pursuant to subclause (j.1)(ii) in the previous year; (q) concentration ratio means the amount obtained by applying the formula: where: P O x R (i) O is the ore grade expressed as a decimal fraction of the average K 2 O content of the ore; (ii) P is the product grade expressed as a decimal percentage of the average K 2 O content of the product; and (iii) R is the recovery factor expressed as a decimal fraction of the recovery of potash product from the ore; (q.1) cost of construction, with respect to a capital asset, includes: (i) the costs of employee wages and benefits arising from the construction of the asset; (ii) direct material costs related to the construction of the asset; (iii) the costs of site preparation related to the construction of the asset; (iv) initial delivery and handling costs of parts and materials related to the construction of the asset; (v) the net costs of testing the asset; (vi) indirect construction costs that are required for the construction of the asset but that cannot be individually traced to the constructed asset, including power, supplies, materials, construction labour and project management; (vii) construction insurance; (viii) the costs of services to provide health, safety and security during the construction of the asset;

10 10 (ix) the costs of design, engineering, procurement and construction management services related to the construction of the asset; and (x) the cost of contractors, sub-contractors, trades and sub-trades directly attributable to the construction of the asset; but does not include: (xi) any profit, gain, commission or overhead to an affiliate providing capital assets to a producer; (xii) the cost of any capital asset, other than approved new mines or expansions, until that asset is in use; (xiii) except for approved remote assets, the cost of any asset that is not located in Saskatchewan; (xiv) except for approved remote assets, the cost of any asset that is not used exclusively with respect to potash produced from a mine; (xv) the cost of feasibility studies, except those related to approved new mines and expansions; (xvi) interest; (xvii) operating costs, operating losses or deficits; (xviii) administrative and corporate expenditures; (xix) fees or expenses for legal or accounting services; or (xx) the cost of directly or indirectly acquiring from a person who is not dealing with the producer at arm s length any interest or right under or in relation to any patent, copyright, trademark, industrial design or other form of intellectual property or similar intangible; (r) Crown lease means a lease granted pursuant to The Crown Minerals Act or any predecessor or successor statute by which the Crown has granted to a person the right to extract, recover or produce a Crown mineral; (s) Crown mineral means any mineral that may be found on, in or under any Crown mineral lands; (t) Crown mineral lands means the mineral interest of the Crown in any lands in Saskatchewan, whether or not the surface rights in those lands are also the property of the Crown; (u) Crown royalty means the royalty on potash payable pursuant to Part IV of The Subsurface Mineral Regulations, 1960;

11 11 (v) daily rated capacity of a major process of a mine, expressed in tonnes of ore per 24-hour day, means the lowest of the products of: (i) the rated capacity of each of the elements comprising the major process, expressed in tonnes of ore per hour; and (ii) the estimated number of hours per day during which the element in question may reasonably be expected to operate; (v.1) decommissioning means the removal or permanent retirement from service of all or part of a mine, and includes any action to so remove or retire; (v.2) demonstration means the initial testing of potash-related technology, prior to commercial application; (w) designated productive capacity means: (i) with respect to an existing mine, the annual productive capacity of the mine, approved in writing by the minister, as at January 1, 1990; and (ii) with respect to a new mine, the annual productive capacity of the mine, approved in writing by the minister, as of the beginning of commercial production; (x) disposition means, with respect to an asset: (i) any transaction or event with respect to an asset that entitles a producer to proceeds of disposition; (ii) any transfer of an asset by way of gift; or (iii) the removal, other than a temporary removal, of an asset from a mine for any reason; but does not include: (iv) any transfer of an asset for the purpose only of securing a debt or loan; (v) any transfer of an asset used as security for a debt or loan for the purpose only of returning the asset by the creditor; or (vi) any transfer of an asset that results in a change of the legal ownership of the asset but not a change in the beneficial ownership of the asset; (y) Repealed. 17 Oct 2003 SR 115/2003 s3. (z) Repealed. 17 Oct 2003 SR 115/2003 s3.

12 12 (aa) freehold mineral lands means any lands that are not Crown mineral lands; (bb) gross revenue means gross revenue determined in accordance with section 5; (cc) index value means: where: (i) for the year 1990, 1.0; and (ii) for any year subsequent to 1990, the amount obtained by applying the formula: A ; B (A) A = the average quarterly price index for the previous year; and (B) B = the average quarterly price index for 1989; (dd) industry sales organization means Canpotex Limited and any other person, organization, syndicate, association, partnership or joint venture that performs a function similar to that of Canpotex Limited and is designated in writing by the minister as an industry sales organization; (ee) interest means, with respect to a mine, an interest in the assets comprising the mine; and (i) a right to production from the mine; or (ii) a right to proceeds of production from the mine; (ff) K 2 O tonne means the quantity of potash that contains the equivalent of one tonne of potassium oxide; (gg) Repealed. 17 Oct 2003 SR 115/2003 s3. (hh) major process of a mine means each of the following processes: (i) the mining of ore or, in the case of a solution mine, the recovery of brine; (ii) the hoisting of ore; (iii) the refining of ore to produce saleable potash; (ii) marketing costs for a year means, subject to subsection 7(6), all costs, charges and expenses incurred by a producer and its affiliates during the year that are directly related and attributable to the marketing of potash produced from a mine in Saskatchewan and includes: (i) with respect to: (A) salespersons based at the head office who spend all of their time in marketing; and (B) salespersons based at locations other than the head office; salaries, commissions and travel and entertainment costs;

13 13 (ii) advertising and sales promotion costs; (iii) costs and expenses associated with the maintaining of sales offices other than the head office; (iv) costs and expenses of conducting sales meetings; (v) costs of market research relating to the North American market; (vi) real property taxes and any business licences or registration fees that are necessary to carry on the business of marketing potash; (vii) fees charged by a non-arm s length marketing agency that are approved in writing by the minister as being reasonable in the circumstances; and (viii) depreciation allowances for: does not include: (A) sales offices other than the head office, calculated in accordance with subsection 8(1); (B) furniture and equipment used exclusively in sales offices, calculated in accordance with subsection 8(2); and (C) automobiles used exclusively for marketing purposes, calculated in accordance with subsection 8(3); (ix) costs incurred for market studies for the purposes of corporate planning; (x) grants or donations; (xi) income or capital taxes; (xii) approved market development costs; (xiii) salaries and benefits for persons located at head office who do not spend all of their time in marketing; (xiv) provision for, or actual, bad debt expenditure; (xv) interest or any form of financing charges; (xvi) except as provided in subclause (vi), administrative and corporate expenditures; (xvii) costs directly related or attributable to public relations; (xviii) costs directly related or attributable to personnel, credit or financing functions or accounting or legal costs; (xix) residual or extraordinary costs; or (xx) costs applicable to the making of offshore sales through an industry sales organization.

14 14 (ii.1) mill means a facility operated to crush, grind, leach, dissolve, roast, float, sift, shake, wash, aspirate or carry out any other process for the purpose of obtaining, concentrating or processing potash, and includes a refinery; (ii.2) mine expansion means any project undertaken by a producer with respect to a mine of the producer that is designed to increase the productive capacity of the mine by a minimum of tonnes; (jj) mine records means the books, records, papers and documents mentioned in section 37; (jj.1) mine research and development costs for a year means, subject to subsection (4), the costs and expenses incurred by a producer in Saskatchewan during the year with respect to potash-related research and development that do not have the prior written approval of the minister, less: (i) subject to subsections (5.1) and (5.2) any subsidy, grant or other reimbursement of these expenditures received by the producer and its affiliates during the year; and (ii) subject to subsections (5.1) and (5.2) any amounts received by the producer and its affiliates during the year for the sale of technology, where the costs of developing the technology were included as mine research and development costs or as approved research and development costs in calculating profits in the current or any previous year, but reductions to mine research and development costs pursuant to this subclause for all years must not exceed the total cost of developing the technology; (jj.2) net mine capital for a year of a producer means the amount calculated pursuant to subsection (8.33); (kk) offshore sale means the sale or other disposition of potash to a purchaser or transferee who is outside of Canada and the continental United States of America; (kk.1) operating costs means the costs incurred at a place in Saskatchewan where production occurs that are directly attributable to mining, refining and producing potash in a saleable form, and includes the following that are related to mining, refining and producing potash: (i) salary payroll; (ii) direct labour; (iii) maintenance labour; (iv) other payroll; (v) employee benefits and payroll taxes; (vi) operating supplies consumed; (vii) repair materials consumed; (viii) production materials consumed; (ix) electricity consumed;

15 15 (x) natural gas consumed; (xi) other utility costs; (xii) insurance premiums; (xiii) purchased services; and (xiv) any other costs that, in the opinion of the minister, are directly attributable to mining, refining and producing potash in a saleable form; (ll) Repealed. 17 Oct 2003 SR 115/2003 s3. (ll.1) overriding royalties means, where a producer produces from land to which it has mineral title, royalties paid by the producer to a former owner of that mineral land; (ll.2) pollutant control facility means a facility or area for the collection, containment, storage, transmission, treatment or disposal of any pollutant arising from mining operations or from the development of or the exploration for potash, and includes environmental protection components of: (i) a mine or mill; (ii) a tailings management area; (iii) an ore storage facility; (iv) a waste rock disposal area; (v) a waste treatment plant; (vi) a fuel storage facility; (vii) a waste sump; (viii) a site drainage control; (ix) a groundwater dewatering system; (x) any equipment used for exploration; (xi) all associated machinery and equipment, including pumps, pipes, conveyors, launders and ditches used in connection with facilities or areas mentioned in subclauses (i) to (x); (mm) proceeds of disposition means: (i) the sale price or any other consideration received or receivable by a producer for the disposition of an asset, and includes: (A) the assumption, undertaking, extinguishment or release of any liability: (I) of the producer; or (II) that affects the asset disposed of; and (B) the value of any benefit of any kind conferred on the producer or on any other person at the direction of the producer as part of the arrangement relating to the disposition of the asset;

16 16 (ii) subject to section 28, any: (A) compensation that is received by a producer; or (B) amount that is paid to a producer pursuant to a policy of insurance; with respect to an asset that is lost, destroyed or unlawfully taken; (iii) subject to section 28, any: (A) compensation that is received by a producer; or (B) amount that is paid to a producer pursuant to a policy of insurance; with respect to an asset that is damaged, except to the extent that the compensation or amount is applied to reduce operating costs pursuant to subclause 7(2)(a)(ii); (iv) subject to section 28, compensation for an asset taken pursuant to statutory authority or the sale price of an asset sold to a person who has given notice of intention to take the asset pursuant to statutory authority; (v) subject to section 28, compensation for an asset injuriously affected, whether lawfully or unlawfully or whether pursuant to statutory authority or otherwise; and (vi) an amount equal to the fair market value of an asset disposed of, where the disposition is made: (A) by a producer to a person with whom the producer is not dealing with at arm s length at the time of the disposition; (B) to a corporation in consideration of the allotment and issue of its shares; (C) to a corporation without share capital, organization, syndicate, association, partnership or joint venture in consideration of the admission to membership in it of any person; (D) by way of gift; or (E) by way of removal, other than a temporary removal, of the asset from a mine; (nn) production means the quantity of potash produced in Saskatchewan from the mines of the producer and includes potash produced from both Crown mineral lands and freehold mineral lands; (oo) productive capacity of a mine means the total of: (i) the designated productive capacity of the mine; (ii) any additional productive capacity of the mine resulting from an expansion approved by the minister that has been completed; and

17 17 (iii) any permanent increase or decrease in annual productive capacity of the mine that: (A) is approved in writing by the minister; and (B) results from an event other than an expansion mentioned in subclause (ii); (pp) profit tax means the profit tax mentioned in clause 4(b) of the Schedule; (qq) profits for a year means profits determined pursuant to section 7; (qq.1) qualified corporate office position means, subject to subsections (1.2) and (1.3), a position occupied by an incumbent employee: (i) whose principal workplace is an office that meets the requirements of subsection (1.1); (ii) who is a permanent full-time employee of the producer or an affiliate of the producer; (iii) who receives a statement of remuneration paid from the producer or an affiliate of the producer indicating the employee s address in Saskatchewan; and (iv) who files an income tax return pursuant to The Income Tax Act, 2000 respecting income in Saskatchewan; (qq.2) qualified new corporate office positions means, for the year 2010 and all subsequent years, the positive difference, if any, between the number of qualified corporate office positions in the year and: (i) for all years after 2009 but before 2015, the number of qualified corporate office positions in 2009; or (ii) for the year 2015 and all subsequent years, the highest number of qualified corporate office positions in any year between and including 2009 and the year that is five years preceding the year for which the calculation is made; (qq.3) qualified existing corporate office positions means, for the year 2010 and all subsequent years, the number of qualified corporate office positions in the year, less the qualified new corporate office positions in the year; (rr) railcar costs for a year means, subject to subsection (8), the total of the following costs, charges and expenses incurred by a producer and its affiliates in connection with the transportation of potash produced from a mine: (i) the difference between: (A) rents for leased railcars, other than railcars with respect to which the producer has claimed a depreciation allowance pursuant to subclause (iii); and

18 18 (B) the total of: (I) mileage credits received or receivable; and (II) revenues received or receivable for subleasing railcars; with respect to railcars owned or leased by the producer or its affiliates and used to transport Saskatchewan potash; (ii) expenses incurred for repairs and maintenance of railcars and for insurance coverage on railcars; (iii) a depreciation allowance calculated in accordance with subsection 8(4); and (iv) costs related to facilitating the movement of potash from the mine to the first arm s-length purchaser or transferee; (rr.1) reclamation means the rehabilitation of all or part of the land, water or watercourses used or disturbed by the construction or operation of a mine or treatment facility, pollutant control facility or mill located at or near a mine; (ss) saleable potash means all potash produced from a mine that is: (i) in the form in which it is produced from the mine, less any portion that is treated by or on behalf of the producer; (ii) in the form in which it exists after being treated by or on behalf of the producer, less any portion that is in non-saleable form; and (iii) treated potash in non-saleable form, to the extent that it is subsequently made saleable by or on behalf of the producer or is sold; (tt) Schedule means The Potash Production Tax Schedule; (tt.1) statement of remuneration paid means the information return that a producer or an affiliate of the producer is required to send to its employee pursuant to section 209 of the Income Tax Regulations (Canada) indicating the remuneration paid by the producer or an affiliate of the producer to the employee; (uu) storage costs for a year means the difference between: (i) all costs, charges and expenses incurred by a producer and its affiliates during the year that relate to the handling and storage of potash produced from a mine in Saskatchewan at a facility in which the potash is stored prior to its sale to an arm s length purchaser, including: (A) rents for any of those facilities if leased by the producer, other than facilities with respect to which the producer has claimed a depreciation allowance pursuant to paragraph (J); (B) expenses incurred for repairs and maintenance of those facilities;

19 19 (C) salaries and fees of persons who provide services at those facilities; (D) throughput charges for handling and storing potash at those facilities; (E) taxes measured by reference to potash inventories; (F) costs incurred for blasting potash to facilitate its removal from those facilities; (G) costs incurred for verifying the accuracy of weigh scales at those facilities; (H) costs incurred for insuring potash while it is being handled or stored at those facilities; (I) real property taxes and insurance premiums on those facilities, to the extent that they are payable by the producer; (J) a depreciation allowance for warehouses, calculated pursuant to subsection 8(5); and (K) a depreciation allowance for furniture and equipment used exclusively at storage facilities, calculated pursuant to subsection 8(6); and (ii) the total of all rebates and credits received or receivable by the producer and its affiliates in connection with those facilities; but does not include administrative and corporate expenditures or income taxes; (vv) substandard potash means potash that requires further processing to meet minimum grade specifications; (vv.1) tonne, when used with reference to potash produced in Saskatchewan other than when used with reference to a K 2 O tonne, means one tonne of potash produced and either sold or disposed of from a Saskatchewan mine; (ww) transferee means a person who receives potash from a producer pursuant to a disposition other than a sale; (xx) transportation costs for a year means all costs, charges and expenses incurred by a producer and its affiliates during the year with respect to the transportation of potash produced from a mine, and includes: (i) freight charges for the carriage of potash by rail, truck or barge, less all credits and rebates received or receivable by the producer and its affiliates with respect to those charges; (ii) ad valorem fees that are imposed on privately-owned railcars and are based on mileage or time; (iii) charges for switching and track leases; (iv) roller car transit and reconsignment charges;

20 20 (v) the cost of insuring potash in transit; (vi) diversion charges; and (vii) lake vessel freight and demurrage costs; but does not include railcar costs, administrative and corporate expenditures or taxes; (yy) treated means concentrated, refined or otherwise processed: (i) in Saskatchewan; or (ii) with the prior written approval of the minister, outside Saskatchewan; (zz) unitization agreement means an agreement for the unit operation of a mine; (aaa) year includes: (i) with respect to a producer who is the vendor of an interest or beneficial interest in a mine, that portion of a year in which the vendor is the owner of the interest or beneficial interest; and (ii) with respect to a producer who is the purchaser of an interest or beneficial interest in a mine, that portion of a year in which the purchaser is the owner of the interest or beneficial interest. (1.1) For the purposes of clause (1)(qq.1): (a) the office must be located in a city or town in Saskatchewan; and (b) the office must not be located at a place where production occurs. (1.2) For the purposes of determining the number of qualified corporate office positions in the year, if all of the conditions set out in clause (1)(qq.1) are not satisfied for a qualified corporate office position for the entire year, only the fraction of the year in which all of the conditions set out in clause (1)(qq.1) are satisfied is to be included for the purposes of that determination. (1.3) For the purposes of determining the number of qualified corporate office positions in the year, if a permanent full-time employee of the producer or an affiliate of the producer has been temporarily replaced due to maternity leave, illness or disability and the employee acting in the position meets the conditions set out in subclauses (1)(qq.1)(i), (iii) and (iv), the replacement employee is deemed to be a permanent employee; (2) For the purposes of the Act and in these regulations, produced means extracted from the ground and includes: (a) treated as defined in clause (1)(yy); and (b) stored and shipped: (i) in Saskatchewan; or (ii) with the prior written approval of the minister, outside Saskatchewan.

21 21 (3) If approved market development costs are incurred by an affiliate of a producer on behalf of the producer and affiliate producers, the amount of the approved market development costs for a year attributed to the producer is the amount A calculated in accordance with the following formula: A = TAMDC x TSP TSPA where: TAMDC is the total approved market development costs for the year incurred by the affiliate; TSP is the total number of tonnes of potash sold during the year from the producer; and TSPA is the total number of tonnes of potash sold during the year from the producer and affiliate producers. (4) If mine research and development costs are incurred by an affiliate of a producer and are applicable to both the producer and affiliate producers, the amount of the mine research and development costs for a year attributed to the producer is the amount A calculated in accordance with the following formula: A = TMRDC x TSP TSPA where: TMRDC is the total mine research and development costs incurred by the affiliate; TSP is the total number of tonnes of potash sold during the year from the producer; and TSPA is the total number of tonnes of potash sold during the year from the producer and affiliate producers. (5) If costs described in subclause (1)(h)(i) are incurred by an affiliate of a producer and are applicable to both the producer and affiliate producers, the amount of those costs for a year attributed to the producer is the amount A calculated in accordance with the following formula: A = TC x TSP TSPA where: TC is the costs described in subclause (1)(h)(i) incurred by the affiliate; TSP is the total number of tonnes of potash sold during the year from the producer; TSPA is the total number of tonnes of potash sold during the year from the producer and affiliate producers.

22 22 (5.1) If amounts received by a producer and its affiliates described in subclauses (1) (h)(ii) and (iii) and (1)(jj.1)(i) and (ii) are received with respect to both Saskatchewan potash operations and other affiliated operations, the amounts received are to be allocated between the Saskatchewan potash operations and the other affiliated operations in a manner approved by the minister. (5.2) If amounts received by a producer and its affiliates described in subclauses (1) (h)(ii) and (iii) and (1)(jj.1)(i) and (ii) are attributable to both the producer and affiliate producers, the amounts received are to be allocated between the producer and affiliate producers in a manner approved by the minister. (5.3) Subject to subsection (8.1), if approved remote costs are incurred at an approved remote asset by an affiliate of the producer and are applicable to both the producer and affiliate producers and the approved remote costs are for the treatment of Saskatchewan potash at the facility of an affiliate, the amount of the approved remote costs allocated to the producer from that approved remote asset for a year is the amount A calculated in accordance with the following formula: A = TARC x TPTP TPTPA where: TARC is the total approved remote costs for that approved remote asset; TPTP is the number of tonnes of potash shipped from the producer that were treated at that facility during the year; and TPTPA is the total number of tonnes of potash shipped from the producer and affiliate producers treated at that facility during the year. (5.4) Subject to subsections (8.2), if approved remote costs are incurred at an approved remote asset by an affiliate of the producer and are applicable to both the producer and affiliate producers and approved remote costs are incurred for a purpose other than for the treatment of Saskatchewan potash at the facility of an affiliate, the amount of the approved remote costs allocated to the producer from that approved remote asset for a year is the amount A calculated in accordance with the following formula: A = TARC x TPTP TPTPA where: TARC is the total approved remote costs for that approved remote asset; TPTP is the total number of tonnes of potash produced during the year by the producer; and TPTPA is the total number of tonnes of potash produced during the year by the producer and affiliate producers.

23 23 (6) If the average quarterly price index for a year is revised in a subsequent issue of the Bank of Canada Review, or its monthly statistical supplement the value for the average quarterly price index to be used is the last value for that year published by the Bank of Canada in the following year. (7) Repealed. 17 Oct 2003 SR 115/2003 s3. (8) Where, in the opinion of the minister, any of the costs, charges and expenses described in clause (1)(rr) may properly be regarded as having been incurred by a producer and its affiliates with respect to the transportation of both potash and another product, the producer may include as railcar costs only that portion of the cost, charge or expense that bears the same proportional relationship to the entire cost, charge or expense that the number of tonnes of potash transported by rail by the producer and its affiliates during the year bears to the total number of tonnes of potash and other products transported by rail by the producer and its affiliates during the year. (8.1) Where in the opinion of the minister, any of the costs, charges and expenses described as approved remote costs may properly be regarded as having been incurred by a producer with respect to both Saskatchewan potash and another product, and where those costs relate to the treatment of Saskatchewan potash at the producer s facility, the producer may include as approved remote costs only that portion of the cost, charge or expense that bears the same proportional relationship to the entire cost, charge or expense that the number of tonnes of Saskatchewan potash treated in the facility with approved remote costs during the year bears to the total number of tonnes of Saskatchewan potash and other products directed through the facility during the year. (8.2) If, in the opinion of the minister, any of the costs, charges and expenses described as approved remote costs may properly be regarded as having been incurred by an affiliate with respect to Saskatchewan potash and other products and if those costs are incurred in an approved activity other than the treatment of Saskatchewan potash, the producer and its affiliate producers may include in a year as their total combined approved remote costs only the amount A that is calculated in accordance with the following formula: A = TC x SVPS SVAS where: TC is the total of the costs, charges or expenses incurred for the year in the approved activity by an affiliate; SVPS is the total sales value for the year of Saskatchewan potash for the producer and affiliate producers; SVAS is the total sales value for the year of Saskatchewan potash for the producer and affiliate producers and the total sales value of the other products determined on the same basis as the total sales value of Saskatchewan potash.

24 24 (8.3) Subject to subsections (8.31) and (8.32), the accelerated capital for a year of a producer is the amount AC calculated in accordance with the following formula: where: AC = A + B + C - D A is: (a) for 2015, 1.2 multiplied by the balance of accelerated capital as it existed on December 31, 2014, after the producer has calculated an allowance, if any, pursuant to subsection 8(8.1) and section 8.1 as those provisions read on December 31, 2014; and (b) for 2016 and subsequent years, the balance of accelerated capital at the end of the previous year, after the producer has calculated an allowance, if any, pursuant to subsection 8(8.1) and section 8.1; B, in the case where the producer has submitted an application for the approval of a project involving a mine expansion or new mine and has received written approval for the project, is the product of: (a) the costs as defined in subsection (8.31); and (b) 1.2; C is the total amount calculated pursuant to subclause 7(1)(b)(i) in the year; and D is the product of: (a) the total of: (b) 1.2. (i) the proceeds of disposition in the year from dispositions of any capital assets whose capital costs have been recognized in a depreciation allowance pursuant to subsection 8(8.1); and (ii) gross revenue from potash produced in the year from a new mine before the beginning of commercial production; and (8.31) For the purposes of clause (a) of the amount B in the formula set out in subsection (8.3), costs means: (a) the capital costs of the project incurred by the producer in the year; and (b) the following costs incurred in the year to the extent that they have not already been included as part of the capital costs of the project or as net mine capital: (i) exploration expenses incurred to determine the existence, location, extent or quality of the potash to be mined, including the expenses of geological studies and drilling and related analyses;

25 25 (ii) the cost of design, the cost of development and the cost of construction of the mine or expansion; (iii) the cost of construction and operation of housing, restaurant or recreational facilities that: (A) are to be used for the benefit of persons engaged in the construction of the mine expansion or new mine; and (B) are located at the mine or at a location that, in the opinion of the minister, is near the mine; (iv) in the case of a new mine, costs directly attributable to potash produced before the beginning of commercial production; but does not include: (c) interest; (d) administrative and corporate expenditures; (e) legal fees or expenses; (f) fees or expenses for accounting services; (g) any portion of expenses that the minister is satisfied are covered by a grant or subsidy. (8.32) If a producer has received approval from the minister for a mine expansion or a new mine, the total of the costs as defined in subsection (8.31) incurred in the years before the approval are considered for the purposes of subsection (8.31) to have been incurred in the year that the project is approved. (8.33) For the purposes of clause (1)(jj.2), net mine capital for a year of a producer is the amount NMC calculated in accordance with the following formula: where: NMC = A B A is the total of: (a) the balance of net mine capital: (i) for 2015, as it existed on December 31, 2014 after the producer has deducted an allowance, if any, pursuant to subsection 8(7) as that subsection read on December 31, 2014; (ii) for 2016 and subsequent years, as it existed at the end of the previous year after the producer has deducted an allowance, if any, pursuant to subsection 8(7);

26 26 (b) the product of: (i) the capital cost of all capital assets acquired by the producer and its non-producer affiliates in the year for use in Saskatchewan in the production of potash from the mines of the producer, other than costs as defined in subsection (8.31); and (ii) 1.2; and (c) the total amount calculated pursuant to subclause 7(1)(b)(ii) in the year; and B is the product of: (a) the proceeds of disposition in the year from dispositions of any capital assets whose capital costs have been recognized in a depreciation allowance pursuant to subsection 8(7); and (b) if the disposed capital assets were acquired by the producer: (i) before January 1, 2015, 1; or (ii) on or after January 1, 2015, 1.2. (9) Repealed. 7 May 99 SR 21/1999 s3. (10) Where an expenditure falls within the meaning of both administrative and corporate expenditures and any other term defined in subsection (1), the expenditure is to be treated as an administrative and corporate expenditure and not as an expenditure within the meaning of that other term. 22 Dec 89 cm-17.1 Reg 6 s2; 27 Dec 91 SR 98/91 s3; 29 May 92 Errata; 11 Oct 96 SR 79/96 s2; 13 Dec 96 SR 95/96 s3; 7 May 99 SR 21/1999 s3; 17 Oct 2003 SR 115/2003 s3; 16 Sep 2005 SR 89/2005 s3; 24 Dec 2010 SR 125/2010 s3; 3 Jan 2014 SR 107/2013 s3; 18 Sep 2015 SR 77/2015 s3. Annual productive capacity 3(1) In this section: PART II Components of Tax Calculations (a) C means the concentration ratio, expressed in tonnes of ore per year; (b) D means the daily rated capacity of a major process of a mine; (c) N means the number of days in a year during which a major process of a mine may reasonably be expected to operate.

27 27 (2) Annual productive capacity is the lowest value of R, where R is calculated for each of the three major processes of a mine, according to the following formula: R = D x N. C (3) Repealed. 24 Dec 2010 SR 125/2010 s4. (4) In determining annual productive capacity, the annual operating time of each element of each major process is the difference between: (a) 365; and (b) the total of: (i) a reasonable number of days during the year for scheduled summer or other shutdowns for holiday purposes, including public holidays within the meaning of The Labour Standards Act; (ii) a reasonable number of days during the year for major equipment overhauls; (iii) a reasonable number of days during the year for scheduled maintenance; and (iv) a reasonable allowance for unscheduled down-time of each major process; without regard to stoppages caused by labour disputes, fires, floods or other similar events. (5) The reasonableness of any estimate used in the calculation of annual productive capacity of a mine is to be measured against the actual operating experience of the mine, disregarding the effects of market factors, but taking into account the type and condition of existing mining machinery, the grade, type and location of the ore and other similar factors. 22 Dec 89 cm-17.1 Reg 6 s3; 24 Dec 2010 SR 125/2010 s4. 4 Repealed. 17 Oct 2003 SR 115/2003 s4. Gross revenue 5(1) Subject to subsections (2) to (12), for the purposes of determining the amount of the base payment and profit tax for a year that a producer is liable to pay, the producer s gross revenue for the year is obtained by calculating the total of all amounts that are received or receivable by the producer and its affiliates as revenue from the sale or other disposition in that year of: (a) potash produced in Saskatchewan from the mines of the producer; (b) Repealed. 8 Dec 2017 SR 121/2017 s3.